The government is expected to allocate about 17.5 million metric standard cubic metres (mmscmd) extra natural gas a day every year to fertiliser producers and about 25 mmscmd to power producers over the next few years.
As of now, the power sector gets about 77 mmscmd of gas and fertiliser sector gets about 40 mmscmd anually. The empowered group of ministers on gas utilisation chaired by Pranab Mukherjee has arrived at a broad consensus that about 35% of the fresh natural gas production should go to fertilisers and about 50% to power sector, a person privy to the development told FE. An official in the fertiliser department said that now all urea producing plants are getting sufficient gas supply, but the proposed allocation may not be sufficient in the future.
Now, the domestic output of gas is a little below 150 mmscmd and the country imports about 25 mmscmd of liquified natural gas (LNG). The proposed allocation is based on the assumption that domestic gas output will go up by 50 mmscmd in the next three-four years, sources said.
The country has the capability of doubling the quantity of imported LNG now itself if terms are favourable. Currently, the global gas market is a buyer?s market with LNG prices significantly low as demand from Europe is slack and there is an oversupply of shale gas in the US.
Experts tracking the commodity said that imported LNG is now available at $6-7 per unit in India including freight charges. But the low price is mainly reflected in the spot market. ?You can lift a couple of consignments at low prices, but long term contracts depend a lot on other factors including the seller?s perception of how prices and demand will move in the long term,? said the person.
The government has estimated that next year, power sector would need an extra 16 mmscmd of gas and the fertiliser sector a little more than 3. In the subsequent two years, power sector?s yearly incremental requirement would be 60 mmscmd, while that of fertilisers would move up to 13 mmscmd in 2012-13 and to 47 mmscmd in the year after, petroleum minister Murli Deora told Parliament in the last week of August in a written reply. Allocating gas to fertiliser units would help in lowering the subsidy given to producers of the price-controlled commodity as they would switch to the more cost efficient feedstock than naphtha. Two-thirds of the country?s 121 lakh metric tonne urea capacity is now fired up by natural gas, one of the cleanest of all fuels.
While Reliance?s prolific KG D-6 field now produces 60 mmscmd of gas now, it has the potential to double the country?s natural gas output eventually. State-owned ONGC is also significantly stepping up its gas production. It has recently intimated the director general of hydrocarbons about the in place gas reserve of 3.42 trillion cubic feet (tcf) and recoverable reserve of 1.9 tcf in the Krishna Godavari basin.